After a steep increase in its leasing costs, China Tower has agreed to lower its rates for rental agreements following negotiations with the country’s three main operators, China Mobile, China Unicom and China Telecom.
The operators all had five-year agreements in place, but have managed to adjust the existing terms to lower the mark-up margin rate – i.e. the fee they are charged in addition to overhead costs – down to 10% from 15%. The change came into effect on 1st January 2018.
In addition to the lower rate, the operators will also benefit from a greater discount for co-tenancies on towers. If two companies share a site, they will each receive a 30% discount – up from 20% - while if all three share a site they will receive a 40% discount, up from 30%. These rates will apply until 31st December 2022.
China Tower signed separate agreements with the three operators back in July 2016. At the time, the operators expected the deals to keep their costs low but the rapid deployment of 4G coverage across China has led to the providers complaining that their operating expenditure in 2017 was inflated by tower leasing fees.
In 2015, the three major Chinese operators transferred ownership of their tower assets to China Tower, which was set up by the government as a dedicated infrastructure firm to reduce construction costs of the operators and avoid redundant building. At the time, the towers were valued at around $36 billion.